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May 13, 2003 - Final rule, Effluent Limitations Guidelines, Pretreatment Standards, and New Source Performance Standards for the Metal Products and Machinery Point Source Category, published in the Federal Register.

How to Take on Venture Capital Without Losing Control of Your Start-Up

By Caron_Beesley, Contributor
Published: January 28, 2013 Updated: August 4, 2016

Considering options for funding your start-up? Wondering if now is the right time to seek venture capital, but worried about losing control of your business?

Here are some tips for weighing your funding options, finding the right venture capital firm for your needs, and working with them once you’ve received your first injection of seed money.

Is Venture Capital Right for Your Small Business?

If you are looking for funding under $200,000, smaller angel investors (this could include borrowing from family and friends) or peer-to-peer lending or crowdfunding might be better options than a larger VC firm. Other alternatives include SBA loans. SBA doesn’t provide the loan; instead, they provide a repayment guarantee to banks, removing much of the risk of lending to small businesses. If your business is engaged in a high-tech industry or R&D, another option is a Small Business Innovation Research Grant. These federal funds support the critical start-up and development stages of small businesses.

Finding the Right VC Firm

If you have a proof of concept and are ready for a significant investment to fund your next stage of growth, then venture capital (VC) might be for you. But how do you find the right VC firm with which to align your business?

Given that a VC firm is going to be involved in your business’ funding and management, choosing one that provides a good match for your business is critical. Look for companies that have experience with businesses and industries like yours. Since a VC is going to be actively involved in your business, other factors such as its personality and core values are also important. A VC that is located close by might also be important.

So where can you find potential VC investors? If you have a good network then there’s a strong likelihood you can pinpoint potential investors via this route. Start locally and extend your search from there. Here are some tips and resources that can help:

  • Start in your Community – If you are involved in a local Chamber of Commerce or other small business group, start your search here. Talk to experts and business peers alike. Small Business Development Centers (SBDCs) and Women’s Business Centers may also be able to help introduce you to local investors. Find a center here.
  • Talk to Your State Economic Development Agency – At the state level, State and Local Economic Development Agencies may be able to help refer you to investors in your region.
  • Consider Trade Associations – Most industries are represented by a trade association, this is another great place to expand your search and meet potential investors. You can also look into national and local investing and venture capital groups like the National Venture Capital Association and the Angel Capital Association.

Your next step is to present any potential investor with a business plan.  SBA’s online Build a Business Plan tool can help you create one.

How to Maintain Leadership Control of Your Company

Many small business owners are reticent to invite VC funding because they’re concerned about losing control of their business. While it’s true that a VC firm will insist on controlling more than 50 percent of an early-stage entrepreneurial enterprise—does this mean you actually relinquish control of your business? Not necessarily. VC deals are structured around mutual incentives and milestones that are beneficial for all, and are rarely about one-sided control. VCs want business founders to aspire to grow and succeed, and they structure the financing deals to ensure this. For example, the terms of typical VC financing dictate that the investors don’t realize a profit until management does (assuming that they’ve already seen a return in capital invested) and vice versa.

Another emerging trend, as reported by the New York Times, is that VCs are increasingly putting a premium on young, visionary entrepreneurs who grew up with the Internet, social media and mobile technologies. With this clout behind them, these young founders are becoming more assertive in funding rounds, securing better terms and even cashing out their investors before an initial public offering.

That’s not to say your VC can’t move to replace you if your business isn’t performing or hitting key milestones. Some other things you can do to ensure you retain some level of control include the following:

  • Insist on an Employment Contract – This can minimize the risk of founders getting fired by their board of directors. Negotiate this before any seed money has exchanged hands.
  • Hire Stellar Employees – Poor staff will compromise the success of your business and jeopardize your position on the management team. By hiring right, you’ll ensure key milestones are understood and met, and profits are realized.
  • Collaborate with your Investors – In addition to funding, investors bring a wealth of experience. Capitalize on this and treat your VC as a partner—not as a threat.

For other tips, read Surprising Ways to Maintain Control of Your Business with Investor Approval from Yahoo Small Business Advisor.

Has your business sought VC financing? What best practices can you share for working with VCs? Leave a comment below.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

May 25, 2006 - Letter to Susan B. Hazen, Acting Assistant Administrator, Environmental Protection Agency, comments on EPA's Proposed Lead; Renovation, Repair, and Painting Program Rule.

January 10, 2006 - Proposed rule, Lead; Renovation, Repair, and Painting Program, published in the Federal Register.

January 18, 2001 - Final rule, Control of Air Pollution From New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards; Highway Diesel Fuel Sulfur Control Requirements, published in the Federal Register.

August 25, 2000 - Letter to Margaret Borushio, Environmental Protection Agency(EPA) providing comments on EPA's proposed Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements.

February 10, 2000 - Final rule, Control of Air Pollution From New Motor Vehicles; Tier 2 Motor Vehicle Emission Standards and Gasoline Sulphur Control Requirements; Diesel Fuel Quality Controls, published in the Federal Register.

November 8, 2002 - Final rule, Control of Emissions From Nonroad Large Spark-Ignition Engines, and Recreational Engines (Marine and Land-Based), published in the Federal Register.

August 14, 2002 - Proposed rule, Control of Emissions from Spark-Ignition Marine Vessels and Highway Motorcycles, published in the Federal Register.

July 12, 2001 - Letter to Dr. James Reisa, Director, Board of Environmental Studies and Toxicology, National Research Council regarding the scientific integrity procedures and the Arsenic Update Subcommittee.

June 19, 2001 - Letter to Dr. Bruce Alberts, President, The National Academy of Sciences regarding the conflict of interest/bias disclosure concerning the Arsenic Update Subcommittee.

3 Ways Business Planning is Like Dribbling a Ball

By Tim Berry, Guest Blogger
Published: January 24, 2013

Think of basketball or soccer. In both of these popular sports, dribbling is what the players do to move the ball in the right direction. It's not the point of the game, it doesn't score baskets or goals, but it's an important skill, right? I think of dribbling as a great analogy for business planning. And here are some reasons why—and some lessons I suggest we can take from that.

  1. Dribbling is a means to an end—not the goal. Planning is like that too. It's about results, running a business—not at all about the plan itself. Good planning is measured by the decisions it causes. It's about managing, allocating resources and accountability. I’ve written this in several places: “You measure a business plan by the decisions it causes.” And this: “Good business planning is nine parts execution for every one part strategy.”
  2. Think of the moment when the player gets the ball in the wrong end of the court or field. That’s either a defensive rebound in basketball or a missed shot on goal in soccer. The tall player gets the basketball and gives it to the one who normally dribbles up court. Or the goalie gets the ball and gives it to a defender. At that moment, in a well-coached team: 1) there is a plan in place and 2) the player knows the plan but is completely empowered to change the plan instantly depending on how the play develops. Business planning done right is very much like that. The existence of a plan—take the ball up the side, pass to the center—helps the team know what ought to happen. But changes—the opponents do something unexpected—are also expected. The game plan doesn’t lock the players in to doing the wrong thing or not responding to developments. It helps them make the instant choices, changing the plan correctly...and when they do, the other players can guess the next step better because of the plan.
  3. Dribbling involves simultaneously looking up, at the field, and developments going on; and down, at the ball, hands, and feet, to manage the details. Proper business planning, in very much the same way, requires looking up at the figurative horizon—­threats, opportunities, competition, market developments, etc.—and down at the details: tasks, deadlines, budgets, accountability, and of course cash flow and plan vs. actual.

I’ve always liked this analogy because it dispels the myth that having a plan reduces flexibility to react to developments. Planning isn’t voided by change; on the contrary, having a plan makes reactions easier. There is no virtue in following a plan just because it’s the plan. Proper planning means regular review and revision. 

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

6 Tips for a Fiscally Fit and Successful Freelance Business in 2013

By Caron_Beesley, Contributor
Published: January 24, 2013 Updated: January 24, 2013

Thinking of becoming a freelancer or hoping to make this year’s freelancing more fiscally fruitful than last? Freelancing is a money game and cash flow is king. And while there may be times when your cup runs over, there will no doubt be other times when it looks ominously dry.

To be a successful freelancer—in addition to being good at what you do—you need to be agile, tenacious, a consummate planner and equipped to deal with fiscal downtimes.

Here are some money-saving and business growth strategies that you can use to ensure the fiscal fitness of your freelancing business this year.

Have a Financial Cushion

Every freelancer needs a financial cushion; in fact, you shouldn’t quit your day job unless you have one. It can take up to six months to build your client base and develop consistent income. Instead, start your freelancing activities “on the side” until you are ready to transition to full time business ownership.

How big should your cushion be? Start by factoring in your living expenses for the next six months and allow for any emergencies that may arise. Next, assess what percentage of your income you’ll need to put aside to make your estimated taxes, social security and Medicare payments. Consider setting up a separate bank account and allocate 30-35 percent of every check you receive for work done into that account. This will help you avoid any day-to-day temptation to dip into it while ensuring you have the money to pay your estimated tax requirements when the time comes.

Reduce Your Overheads

Most freelancers can work from home. If you really need social interaction or want to leverage the brainpower of fellow freelancers, consider a co-working space (now available for a low-cost in many cities) or even your local coffee shop. 

Likewise, buy as little as you need. If you’re not commuting anymore, do you really need an expensive 4-wheel-drive SUV or truck in the driveway? Do you really need the latest high-end smartphone or laptop or could a cut-price one do the job just as well? What about computer software—could you cut costs by using a free email service or a low-cost word processing app? What about buying surplus office furniture?

For more lean spending tips, read: 6 Tips to Rein in Spending and Be a Lean Start-Up.

Invest in Good Back-Up and Use it

If there’s one thing that any freelancer can be sure if in their business, it’s that one day your PC will succumb to the dreaded “blue screen of death,” be infected by a virus or taken over by malware. Without an IT department to turn to, you’ll end up throwing cash at an expensive fix and risk losing all your work and business records in the process. Regularly backing up your work, both to a standalone hard drive and to an online location (providers like DropBox, Symantec, and Carbonite offer free or low-cost services) will ensure your data is protected and always accessible. Get more tips here: Finding the Best Backup Option for Your Small Business Data.

Look for Ways to Expand Your Business on the Back of Existing Work

Growing a freelancing business is a challenge. Networking often takes you away from existing work, while developing and nurturing new relationships into profitable clients takes time. Instead, look for to expand your business and earn more money with existing clients, based on the work and track record that you already have. Check out some tips for doing just this in my earlier blog, 5 Ways to Become an Indispensable Freelancer and Earn More Money from Your Clients.

Collaborate with Others

Growing existing business is good, but it’s also important to have multiple streams of income. One option for growing your business this way is to team with complementary businesses. For freelancers, for example, work on building relationships with those who serve your target customers. Photographers could collaborate with wedding planners, or graphic designers could team with marketing consultants.

Don’t Be Afraid to Ditch Unprofitable Clients

Freelancers often price their services at different rates in order to secure business. But if a low-paying client is also your most demanding and tricky client—whether based on the work you are required to do or the nature of the relationship—it might be time to cut your losses, walk away from this type of low-margin work and concentrate on deepening other relationships.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Meal and Rest Breaks – What Small Business Employers Need to Know

By Caron_Beesley, Contributor
Published: January 23, 2013

Should you pay employees for rest and meal breaks? Are you even required to offer such breaks?

We all need rest and meals during work hours and the law stipulates standards for these breaks, including whether your employees should be paid for them. Here’s what you need to know:

Federal Wage and Hour Laws

Under the Fair Labor Standards Act of the U.S. Department of Labor, non-exempt employees can take short breaks (although it’s not mandatory). A short break is typically considered to be 20 minutes or less, and employees must be paid for these as hours worked. When it comes to meal breaks, anything more than 30 minutes does not generally need to be compensated as work time (although again, meal breaks aren’t required under federal law). But here’s the caveat – if your employee does any kind of work during that meal break, such as answering email or taking a business phone call, then you must pay them for that break.

Bathroom breaks, which are required under the Occupational Safety and Health Administration, are excluded from the definition of rest breaks.

To avoid any legal hassles, be sure you communicate your break policy to employees. For example, employers have been known to come under the spotlight for permitting certain workers to take frequent (paid) cigarette breaks, while other employees do not. If employees are taking unauthorized breaks, or unauthorized extensions of authorized breaks, you are not required to count the unauthorized time as hours worked (so long as the terms of what is authorized/unauthorized have been expressly communicated to employees).

State Wage and Hour Laws

Even though meal and rest breaks aren’t required under federal law, some states do impose mandatory breaks for employees in specific industries after a certain amount of hours worked. For example, in California, a meal break must be provided no later than the end of the employee’s fifth hour of work. So giving employees the option of skipping lunch to get out of work early is breaking the law.

Generally, state laws stipulate a 30-minute paid meal break. For laws in your state, check this consolidated breakdown of state meal break requirements and rest break laws from the Department of Labor. You can also refer to your individual state labor office.

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About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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